Channel Partners Struggle with Transformation
No one ever said that transforming your channel-partner business was going to be easy; in fact, it appears that when it comes to partner transformation, the number of “transformation followers” and “transformation leaders” balances out. And, a scant 5% of partner businesses are nearing completion of their transformation journey.
That’s according to recent research from Techaisle, which surveyed more than 800 U.S. channel partners with revenue from $500,000-$50 million and measured them against 12 points of Techaisle’s channel-transformation imperatives. The results found that more than half (52 percent) of partners are transformation followers and 48 percent are transformation leaders.
“These are not very good results because channel transformation has been very slow,” Anurag Agrawal, CEO and analyst at Techaisle told Channel Futures. “I would have expected that the channel would have moved further along by now.”
Here’s a sample of Techaisle’s 12 imperatives – value addition versus value creation; recurring revenue versus margin for investment; and deployment versus orchestration, to name a few. Currently, 45 percent of partners are in the initial stages of transformation working on an average of 5.3 of the 12 imperatives.
The channel doesn’t have to go it alone on their transformation journey. To the benefit of partners and certainly in service to themselves, many vendors and distributors are reaching out to help partners reimagine their business models. However, there’s been a lot of waiting and watching.
“Slow was expected but there doesn’t seem to be a plan within the channel community to look at how they’re really going to transform themselves and there doesn’t seem to be a sense of urgency,” said Agrawal.
Most of the partners included in the Techaisle research represent traditional VARs, SIs, MSPs and consultants.
Agrawal highlights three areas of his research that are priorities for IT vendors, where the channel is falling short, and a recommended timeline for transformation.
Transforming from ‘Sales Quota’ to ‘Book of Business’
Today, 58% of partners are focused on sales quotas with either no business goals or merely skeletal ones. They have inadequate strategies to maximize revenue from their current clients. Techaisle has a timeline for all partners. By 2022, all partners should have implemented at least one of three sales rep compensation models, and vendor metrics for SPIFs should be designed to support recurring revenue compensation structure.
In the conventional IT sales approach, sales reps are given quotas, and some portion of the quota is retired with each new sale. Reps who exceed quota get overachievement bonuses, while those who fall short lose part of their variable compensation, and may be in danger of being replaced.
This approach works well in an environment where the value of the contract is defined at signing, and where the amount owed is …